States face cuts in highway funds

Ricardo Alonso-ZaldivarLos Angeles Times

Published Tuesday, January 29, 2002

WASHINGTON -- President Bush's budget will slice $9 billion out of federal aid to state highway programs next year, largely because of a drop in gasoline tax collections, federal and state officials said Monday.

The biggest loser is California, which faces a reduction of $663 million from the $2.5 billion in federal aid it is receiving this year, according to the federal Transportation Department.

Word of the federal aid cut -- nearly 29 percent from the $31.8 billion budgeted this year -- sparked plans for intense lobbying by state officials and the road-building industry.

After California, the big losers in the federal aid derby include Bush's home state, Texas, and Florida, where his brother, Jeb, is governor.

John Horsley, executive director of the American Association of State Highway and Transportation Officials, said the construction industry was projecting a loss of 90,000 jobs nationwide in 2003 as a result of the cuts.

Bush administration officials say their hands are tied. A senior Transportation Department official, who spoke on condition that he not be identified, said Congress had decreed that highway money be distributed according to a formula.

The formula depends on revenue from federal taxes on gasoline and on sales of big trucks, both of which have declined substantially in the recession. The problem has been magnified because federal highway funds distributed to the states for 2002 were based on overly optimistic revenue projections, and the law requires that such generosity in any one year be followed by compensating cuts in the next year.

The official also warned that bailing out the states would add to the federal deficit.

Horsley said the states should not have to pay for the federal government's faulty estimates. Many governors, he said, had already assumed the federal dollars would be in their budgets.

"The forecast was exaggeratedly high," he said, "and now we are being told we have to pay the price."

The federal highway trust fund has a positive balance of $18.5 billion, and the states want at least some of that used to ease the sharp cutback.

But federal trust funds exist in account ledgers only. The revenue from the gasoline and truck sale taxes go into the same big pot as personal income tax revenue. Drawing down the $18.5-billion "balance" in the highway trust fund would entail spending money from other sources, including the personal income tax.

The American Road and Transportation Builders Association has scheduled a lobbying campaign on Capitol Hill next week, when Bush formally releases his budget. Dozens of contractor executives will descend on members of House and Senate transportation panels, as well as on the Federal Highway Administration.